How Al-Haj Textile posts record profit in FY24

Infographic: TBS

Al-Haj Textile Mills Limited has surprised the market by posting a sharp turnaround in its financial performance in FY24, reporting its highest-ever profit and announcing a record dividend, despite having remained loss-making for much of the year.

The company's audited financial statements show that the profit surge was driven primarily by a one-off accounting recognition linked to the resolution of a long-running legal dispute with Agrani Bank, rather than a strong operational recovery.

According to the audited results for FY24, Al-Haj Textile recorded a net profit of Tk22.45 crore, compared to a loss in the previous year. Earnings per share rose to Tk10.07, a significant reversal from a loss per share of Tk0.78 in FY23.

The company's net asset value per share jumped by 119% to Tk18.52, reflecting the impact of the recognised income. However, the financial statements also show that net operating cash flow per share remained negative at Tk2.58, indicating continued pressure on cash generation from core operations.

The scale of the turnaround appears particularly striking given that the company had reported a net loss of Tk7.56 crore for the nine months ended 31 March 2024. This underscores that the bulk of the profit was booked in the final quarter of the fiscal year following changes in accounting treatment related to a disputed fixed deposit receipt with Agrani Bank.

Shuva Ray, acting company secretary of Al-Haj Textile, told The Business Standard that the board approved the recognition of Tk43.95 crore received from Agrani Bank as income in the FY24 income statement, based on the auditor's opinion.

Previously, this amount had been shown as a liability due to ongoing legal proceedings.

"As per the auditor's guidance, the board approved booking the FDR amount as income instead of keeping it as a liability. That is why the net profit increased significantly," he said.

Company disclosures show that Al-Haj Textile had been involved in a prolonged legal battle with Agrani Bank over the recovery of the FDR amount. The dispute was ultimately resolved in the company's favour when the Supreme Court vacated the case on 9 November 2021.

Although the court order allowed the company to recover Tk43.95 crore, the bank did not transfer the full amount and instead filed a default loan case against the company and its chairman and managing director in the Artha Rin Adalat. As a result, the company continued to treat the received amount as a liability in its books.

In its statement, Al-Haj Textile explained that legal advisers had certified that further proceedings of the Money Loan case were stayed by court order, meaning any interest charged on the loan during the stay period would be illegal.

The company also cited uncertainty over the final settlement amount and the connection of the contempt petition with loan repayment as reasons why the amount had previously been shown as a liability under international accounting standards. With the stay order having been vacated and the board revisiting the issue, the company ultimately recognised the amount as income in FY24.

Alongside the strong headline profit, the board declared the highest dividend in the company's history, recommending a 5% cash dividend and a 35% stock dividend for FY24. This surpasses the previous record of a 25% stock dividend declared in 2013. The company did not declare any dividend in FY23.

The stock dividend remains subject to approval from the Bangladesh Securities and Exchange Commission. The record date has been set for 15 January, while the annual general meeting is scheduled for 7 February.

A company insider said Al-Haj Textile had failed to finalise its financial statements and declare dividends on time in recent years due to internal conflicts among directors and sponsors over control of the board. Those disputes led to court proceedings and delayed regulatory compliance. The conflicts were eventually resolved through discussions and alternative dispute resolution mechanisms.

In November 2024, the company informed the stock exchanges that sponsor-family directors had reached a settlement, paving the way for board restructuring. Following the resolution, a shareholder holding more than 5% equity was appointed as a director, and regulator-appointed independent directors were withdrawn.

Despite the upbeat earnings announcement, the stock closed 2.12% lower at Tk143.10 on Monday, taking the company's market capitalisation to around Tk319 crore.